Innovative way to fight climate change will save New Yorkers big-time

This fall, extreme weather events have not only devastated communities, they have also landed a direct hit to the U.S. economy, causing almost $300 billion in economic losses. While much of that cost is borne by our nation’s most vulnerable populations, we all pay the price. The U.S treasury is anticipated to pick up approximately $100 billion of that expense—or $724 for every taxpayer. But, that’s a drop in the bucket compared to what’s ahead. According to a recent report, the combined annual price tag for extreme weather and pollution could reach almost a $1 billion a day.

Climate change could easily reduce the New York metropolitan region’s $1.5 trillion GDP by several percentage points. Preventing this fate requires a costly set of interventions, including adapting everything from energy grids to transportation and coastal housing. As nearly every commuter and resident can attest, much of our infrastructure is falling apart. With or without climate change, we know we need to provide greater system redundancy, autonomy and resilience.

But, there is a financial upside we should consider. First, there is plenty of money to invest in infrastructure and adaptation. In fact, there is way more money in the world than there are assets to invest in—particularly in fixed assets such as infrastructure. Second, the region is a low credit risk. We pay our bills on time. As a result, the region has a tremendous capacity to leverage limited public funds with private sources of capital. In this context, this is an opportunity to create a new asset class for climate-adaptive infrastructure.

Our golden moment to overhaul our region’s response and preparedness to extreme weather and climate change is now. The Regional Plan Association yesterday released its fourth regional plan for the New York, New Jersey and Connecticut region. It has governance and policy recommendations to help the region address the challenges of climate change. We worked with the RPA to develop a model for a Regional Resilience Trust Fund to help pay for some of the adaptation measures needed to protect our residents and economy.

In our model, each state would create a public benefit corporation that floats bonds based on revenue from a surcharge on property and casual insurance lines. With a 10-year sunset on the surcharge, each of the states could have an independently operating fund that provides grants and loans to finance much needed infrastructure development. In fact, the trust funds don’t have to be capitalized from insurance surcharges; California is looking at using this model to leverage auction revenues from cap-and-trade.

The insurance surcharges themselves are much less of an economic burden for households than one might imagine. For Connecticut, as little as $1 a month from the average consumer could pay for the state’s wish list of resilience projects. The cost burden would be as little as $5 a month for the average New York consumer. In New Jersey, a greater backlog of projects would require closer to $15 a month from consumers. With the use of bond leverage, the cost-burden on consumers would be no more of an inconvenience than those mysterious charges on your cellphone bill.

Of course, we don’t want this to become one big slush fund for politicians to buy influence. Each fund would therefore be independently managed by fiduciaries in the private sector subject to state oversight. In addition, the triaging and underwriting of projects would be subject to a regional coastal commission (also being recommended by RPA) that would give priority to our regional infrastructure for transportation, energy and water.

Between the trust funds and the commission we could not only reduce our region’s vulnerability to climate change but also reduce the economic burden that residents are destined to bear. The fact is we are already paying for the direct and shadow costs of climate change today in our energy bills, transit passes, property taxes, insurance premiums and grocery bills, and with our time.

The trust funds give us an opportunity to rewrite the rules of the game. For every $1 that we spend, we will reduce our liability by anywhere from $4 to $7. But these trust funds are not only spending the $1, they are also investing it in a manner that ultimately gives our region control over its destiny without being subject to the whims of irregular federal funding. We can always find the money to invest in our future. However, the longer that we wait to act, the more it will take from our pocketbooks. We shouldn’t just be saving for our retirement, but investing in our savings.

Jesse M. Keenan is a lecturer in architecture at Harvard University Center for the Environment and Harvard Graduate School of Design.

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